MARKETWATCH TALKS WITH ROBERT SAVAGE: HEDGE FUNDS ARE RAMPING UP BETS THAT THE DOLLAR WILL RISE

Some hedge fund managers said their outlook for the dollar softened somewhat after the May jobs report though they remain bullish.

Robert Savage, the founder of CCTrack Solutions, said he now expects the dollar to rise by 1% to 2% against its main rivals in the coming months. Previously, he believed a summer Fed hike would send the currency higher by as much as 5%. That May bombshell changed his mind.

“Look, I was in the camp that [the Fed] would be going two to three times,” Savage said. “Now I’m in the one-to-two camp.”

Even though his fund is generally long the dollar, Savage said his conviction in those positions is low because of the dollar’s tendency to abruptly change direction.

Savage‘s fund uses an algorithm-driven strategy, frequently moving in and out of positions as market conditions change. Because of this, he declined to comment on specific trades he had put on.

Savage’s longer-term outlook for the dollar is somewhat less sanguine. He said there’s a strong chance U.S. growth could falter during the next two years, possibly forcing the Fed to reverse course and cut rates.

“People invest in the U.S. because it’s the tallest pygmy, it’s the one-eyed man. It’s better than a lot of alternatives,” he said.

Macro-focused hedge funds were up 0.4% so far this year, according to data from Hedge Fund Research that measures performance through the end of May. By comparison, equity-focused funds were up 0.2%. (Source: MarketWatch)